As the end of the financial year draws near, have you considered all your tax minimisation strategies available to you and your business? At Initiative, we believe it’s important for you to know an estimate of your tax bill before the end of the financial year arrives….so there’s no bill shock.
With this in mind, we’ve listed a few of our favourite and most beneficial strategies for you below.
Asset low value pools
Businesses with aggregated turnover under $10m have access to accelerated depreciation via the small business low value pool legislation.
Also, this pool allows you to an immediate write off for assets under $20,000 purchased between 1 July 2017 and 30 June 2018.
If you have had a large capital gain during the year, you may want to consider reviewing your other investments for a sale where a capital loss will arise. Capital losses can be used to offset capital gains.
Deferral of income
Subject to cash flow considerations and anti-avoidance rules, if your income is high this year consider deferral to the following year, for example:
- delay selling a capital asset
- adjust deposited funds so that interest income is not paid, or
- delay invoices to after year end.
If your business has high cash income, deferral could be risky by putting you outside the ATO small business benchmarks.
Prepayment of expenses
Subject to cash flow considerations, consider prepaying expenses by year’s end in order to increase deductions. This applies particularly if the income in the following year is expected to be lower than in the current year.
Review your stock at year-end to determine whether it can be written off as obsolete. Also, no adjustment for closing stock is necessary when a reasonable estimate of closing stock is within $5,000 of opening stock.
Consider writing off any bad debts to claim a tax deduction at year-end. Also, GST adjustments may be required on the original invoice.
Paying your employees’ super before 30 June will make the expense tax deductible. Consider making the payment as part of your final payroll of the year.
For family businesses, take care not to exceed annual caps for concessional and non-concessional superannuation contributions.
Donations or gifts of $2 or more to a deductible gift recipient (DGR) are tax deductible. A deduction is also allowed for gifts of publicly-listed shares that have been held for at least 12 months and which are valued at $5,000 or less.
Author: Kim Jay